Where Commercial Receivables Come From: The Bank Funding Gap
- Mar 23
- 1 min read
Updated: Apr 6
Large banks approve roughly 13 to 15 percent of small business loan applications. Community banks do better at 40 to 50 percent, but their total lending capacity is limited. For every 100 businesses that walk into a major bank, about 85 leave without capital.
The Gap Does Not Eliminate the Need
A declined business still needs to make payroll, buy inventory, and fund operations. These businesses turn to alternative funding. Revenue based financing. Short term receivable purchases. The alternative lending market exists specifically because this gap has persisted for years.
Every Transaction Creates a Receivable
When a business receives capital through alternative funding, a payment obligation is created. The business agrees to remit a portion of its daily revenue until the obligation is satisfied. That obligation is a commercial receivable.
How It Becomes a Purchasable Asset
Under UCC Article 9, that receivable can be purchased through an absolute assignment. A UCC 1 financing statement is filed with the Secretary of State, creating a perfected security interest on public record. The buyer holds first position. Collection happens daily through ACH. Duration is defined by the purchase agreement, not by market conditions or fund terms.
The Cycle
Bank declines create demand. Demand creates receivables. Receivables become purchasable assets. As long as the funding gap exists, the origination pipeline keeps running.
Comments